KOYER v. McCOMBER (1938)

Plaintiffs commenced an action for damages, alleging fraud in connection with an exchange of properties owned respectively by plaintiffs and defendants C. L. McComber and his wife, Linnie H. McComber. These last–named defendants answered and set up three separate cross–complaints. The defendants Holz, Jasper, and Leninger also filed answers, while the defendant Mitchell failed to answer and his default was duly entered. The trial was had before a jury, resulting in a verdict for plaintiffs in the sum of $47,500, together with a verdict against defendants McComber on their cross–complaints. Judgment being entered on the verdict, defendants McComber, Holz, and Jasper moved for a new trial. From an order granting such motion, this appeal is prosecuted by plaintiffs.

Epitomized, the facts of the case are that plaintiffs were the owners of certain unimproved real property in the city of Los Angeles, while defendants McComber owned certain improved real property in the city of Long Beach, known as the Terry Apartments. In the early part of March, 1932, the defendant L. B. Mitchell, who was the brother of plaintiff Martha M. Koyer, went to the office of defendant C. T. Holz, a real estate broker in Long Beach, stating that his sister and brother–in–law, the plaintiffs herein, wished to exchange certain real property of theirs for income–producing property. The defendant Holz informed Mitchell that he believed the plaintiffs might be interested in the Terry Apartments; that, while he did not have a listing on the property, he knew the defendant Jasper did have such a listing; and that a deal might be made whereby the Terry Apartments could be exchanged for plaintiffs' vacant property. Within a few days thereafter, defendant Jasper reported to defendant Holz that he had seen defendant McComber and that the latter was receptive to any proposition which might be submitted to him respecting an exchange of real properties. Shortly thereafter the plaintiffs, Mr. and Mrs. Koyer, went to Long Beach to the office of defendant Holz, and through defendant Jasper plaintiffs were permitted to go through the Terry Apartments. This first inspection of the apartments by plaintiffs took place in March, 1932. On March 9, 1932, the defendant Holz forwarded a letter to plaintiff A. S. Koyer in which he set forth the dimensions of the lot, a description of the building, which was characterized as being of reinforced concrete, and which communication further declared that the income from the building during 1930 was $34,000, while the expenses, including taxes, approximated $1,000 per month, and that during 1931 the Terry Apartments produced an income of between $29,000 and $30,000, with expenses about the same as during the preceding year. The letter also called attention to an incumbrance on the Terry Apartments in the form of a loan in the sum of $100,000 due the New York Life Insurance Company, running for 10 years, with interest at 6 per cent., payable $2,500 semi–annually, and that the loan had been reduced to $92,500.

On April 16, 1932, plaintiff A. S. Koyer submitted to defendants Holz and Jasper a written proposal of the properties which plaintiffs would exchange with defendants McComber for the Terry Apartments. Following receipt of this letter, defendants McComber, Holz, and Jasper came to the city of Los Angeles and inspected the properties which plaintiffs Koyer proposed to exchange for the Terry Apartments; and on this date defendant McComber made his final arrangements with defendants Jasper and Holz for the payment of the commission due them in the event an exchange with the plaintiffs was completed. Following further negotiations, all of the parties met at the Terry Apartments on May 18, 1932, upon which occasion an agreement of exchange was entered into. Following completion of an escrow, the plaintiffs went into possession of the Terry Apartments about the middle of June, 1932. A short time thereafter, according to the plaintiffs, while they were arranging for alterations in the basement of the building, they discovered that certain of the structural beams, represented to them to be of reinforced concrete, were made of wood; and thereafter further investigation revealed that the property, instead of being a class A reinforced concrete building, was not only not a reinforced concrete building, but was a class C building, within the meaning of the ordinances of the city of Long Beach. Plaintiffs also contended that within a short time after this discovery Mr. Koyer had an audit made of the books, discovering that the property, instead of making a profit, as set out, was making little, if any, money when the taxes on the property, the interest on the mortgage, and the costs of the insurance were taken into consideration. The record indicates that the books in the apartment house contained only the running expenses of the building, and that the operating profit was paid to defendant McComber, who in turn kept private books at his ranch in Buena Park of the amount of taxes, insurance, and interest costs. It might here be noted that during the negotiations it developed that plaintiffs were unable to deliver a clear title to one of the pieces of property which they were exchanging with defendant McComber, and it was thereupon agreed between the parties that plaintiffs would, as they did, execute a promissory note in the sum of $10,000, payable to defendants McComber, secured by a second deed of trust on the Terry Apartments. None of the principal on this note has been paid, and but a small amount of interest payments were met.

Plaintiffs base their claim for damages upon the alleged misrepresentations with reference to the construction of the Terry Apartments and the income and expenses in connection with the operation thereof, which representations defendant Holz testified he obtained from a prospectus prepared by defendant Jasper and a Mr. De Land, the latter a son–in–law of defendant McComber, whom the latter had placed in charge of the Terry Apartments, and to whom defendant McComber had referred defendant Jasper to obtain information regarding the property in connection with the exchange thereof. That both defendants Holz and Jasper, as well as De Land, were the agents of defendants McComber there can be no question.

It is apparent from the foregoing that, if the appeal herein were one taken from the judgment entered on the verdict in favor of the plaintiffs and against defendants McComber, it would be held that the evidence narrated would be legally sufficient to sustain such judgment. But that is not the situation. We are here dealing with an appeal from an order of the trial judge granting a new trial, and therefore on such an appeal, in reviewing the evidence, we are governed by an entirely different rule. As said in Moss v. Stubbs, 111 Cal.App. 359, 295 P. 572, 296 P. 86, the well–settled rule is that the matter of granting or refusing to grant a new trial is largely within the discretion of the trial court (Work v. Whittington, 61 Cal.App. 302, 214 P. 474); that in passing upon such motion the trial court is not bound by the rule of conflicting evidence as is the appellate tribunal (Huckaby v. Northam, 68 Cal.App. 83, 228 P. 717; Smith v. Royer, 181 Cal. 165, 183 P. 660); but must weigh and consider evidence for both parties and determine for itself the just conclusion to be drawn from it (Green v. Soule, 145 Cal. 96, 78 P. 337; Rudin v. Luman, 53 Cal.App. 212, 199 P. 874); and, if it is satisfied that the finding of the jury is contrary to the weight of the evidence, it may grant a new trial (Gordon v. Roberts, 162 Cal. 506, 123 P. 288). As a matter of fact, even where the evidence is not conflicting, and all the proof seems to be favorable to one or the other of the parties litigant, the question of the probative force or the evidentiary value of the testimony is, nevertheless, within the determination of the trial court in a proceeding on motion for a new trial. Otten v. Spreckels, 24 Cal.App. 251, 141 P. 224; Roberts v. Southern Pac. Co., 54 Cal.App. 315, 201 P. 958. Therefore, under the law as thus declared, it is beyond the power of the reviewing court to interfere with the determination of the trial court unless a manifest abuse of discretion appears (Campanella v. Campanella, 204 Cal. 515, 269 P. 433; Buck v. Borchers, 203 Cal. 210, 263 P. 226), or there is no substantial conflict in the testimony on material issues and the evidence as a whole is insufficient as a matter of law to support a verdict in favor of the moving party. (Springer v. Pacific Fruit Exchange, 92 Cal.App. 732, 268 P. 951; Wendling Lumber Co. v. Glenwood Lumber Co., 153 Cal. 411, 95 P. 1029; Empire Inv. Co. v. Mort, 169 Cal. 732, 147 P. 960; Harvey v. Machtig, 73 Cal.App. 667, 239 P. 78).

It is upon the principle just stated that we conclude that the trial court was in error in granting a new trial as to defendants McComber upon the first ground set forth in the motion, viz., insufficiency of the evidence to justify the verdict. We arrive at this conclusion because a reading of the transcript shows that there is no conflict whatever in the testimony with reference to the fact that defendants McComber, through their duly appointed and designated agents, falsely represented to plaintiffs that the Terry Apartments was a reinforced concrete building, and also misrepresented the income and expense items in connection with the operation of the property. In fact, defendant C. L. McComber himself testified that at all times he knew personally that the structure was not a reinforced concrete building, and there is no conflict whatever in the evidence to the effect that two sets of books were kept in connection with the Terry Apartments, one set by the manager, De Land, in which were recorded so–called operating expenses, while another set of books was kept by the owner, defendant McComber, at his ranch, in which were recorded other items of expense, which, when deducted from the gross income for 1930 and 1931, showed a very meager profit, far less than was represented to plaintiffs. These constituted material representations, and, there being no conflict in the testimony that the plaintiffs relied thereon to their damage, the same constituted material issues at the trial, and the evidence thereon, as a whole, is insufficient as a matter of law to support a verdict in favor of the moving party as far as defendants McComber are concerned. Such being the case, the motion for a new trial on the ground of insufficiency of the evidence to justify the verdict should have been denied as to the last–mentioned defendants.

We are not unmindful of respondents' claim that reference to the plans and specifications for the Terry Apartments would have disclosed to plaintiffs the class and construction of the building, and also that plaintiffs undertook to examine such plans and specifications, but desisted when the same were not available at the time one of the plaintiffs went to inspect the same. However, the general rule is that one has a right to rely on statement of material facts essentially connected with the substance of the transaction, when the party making the statements is aware that reliance is being placed on his representations and that the facts are not and cannot be expected to be within the first party's knowledge. 12 Cal.Jur. 754, and cases cited. As to the representations made concerning the income and expense accounts, plaintiffs had no knowledge thereof, nor means of obtaining such information except from the defendants, and, if one material statement be false, and there is no conflict in the record here either as to the materiality or the falsity of the last–named representation, it is sufficient ground for legal action.

As to the defendants Holz and Jasper, a different situation presents itself. The false representations made with reference to the construction of the building and items of income and expense which were given to plaintiffs were relayed to them by respondent Jasper, who received them from the respondent McComber, through the latter's agent and manager of the Terry Apartments. The trial court had a right to conclude that the conduct of the respondent Jasper was without taint of fraud; that he had a right to believe that the information so given him was true and to accept respondent Jasper's testimony that he did so believe. As to the defendant Holz, we are in accord with the holding of the trial court, summarized in its order granting a new trial, that the evidence was insufficient to justify any judgment against Holz.

Other grounds upon which the order granting a new trial was based were “that damages are excessive in view of the refusal to pay the $10,000 note”; and “that the judgment is against the law and evidence, plaintiff having affirmed the exchange and refused to comply in toto with his contracts.” The trial court apparently was of the opinion that the plaintiffs could not maintain this action for damages unless it was alleged and shown that they were ready and willing to comply with the provisions of the contract, but it is a principle of universal application that a right of action for damages for fraud arises immediately upon the consummation of the fraud, which may arise in a contract executed or executory. Paolini v. Sulprizio, 201 Cal. 683, 258 P. 380. The action is not upon the contract, but is collateral to it, and is on the case; and one induced by fraud to enter into a contract for the exchange of real estate is not required to perform on his part as a condition to maintaining an action for deceit. Indeed, in many cases it would be unjust to hold that the party defrauded shall lose the advantage which attaches to a tort action unless he makes further venture in a transaction into which he has been induced by fraud to enter. While it is true he affirms the contract, he does not do so as one made in good faith. He consents to be bound by the provisions of the agreement, but does not thereby release or waive his claim for damages arising from a fraud collateral to the agreement. He must himself be willing and able to perform on his part, and it must be conclusively taken that he stands ready and willing to pay the full consideration called for by the contract, if and when he shall become liable therefor. If the contract remains executory, the damages which he is entitled to recover are no other and no greater than those which would be awarded to a party who has fully executed his contract. From any award which may be made because of the fraud must be deducted any unpaid part of the purchase price. Palladine v. Imperial Valley, etc., Ass'n, 65 Cal.App. 727, 225 P. 291. And in the instant case the jury was properly instructed by the trial court that from the damages which they found the plaintiffs were entitled to recover they must deduct any sum which they might find that the plaintiffs owed the defendants under the contract for the exchange of properties. This instruction of necessity referred to and included the obligation of the plaintiffs to pay the defendants $10,000 upon their promissory note. It cannot be assumed that the jury erroneously disregarded this instruction and failed to deduct this sum which the plaintiffs owed the defendants under the contract in determining the final amount of their verdict. One induced by fraud to enter into a contract for the purchase of real estate may withhold payments after the discovery of the fraud and pending the action for damages. True, the plaintiff in such an action must be willing and able to pay if and when he shall become liable therefor; but the fraud suspends liability to make payments accruing after discovery of the fraud and pending the action. Payments may be withheld to recoup such damages as may be recovered. Pembrook v. Houston, 41 Cal.App. 54, 55, 181 P. 828.

As to excessive damages, a new trial may not be granted merely because the verdict seems large, or because it is larger than the court, if sitting as a jury, would have given; but only where it appears that it was “given under the influence of passion or prejudice.” Section 657, Code Civ.Proc. In other words, the “verdict will not be disturbed as excessive unless the damages awarded are so excessive as to indicate that the jury acted under such influences.” 20 Cal.Jur. 101. While the evidence was in conflict concerning the amount of the damages suffered by plaintiffs, there is nothing in the record indicating that the jury here was actuated by elements of passion or prejudice in believing and acting upon testimony which, if believed, justified a finding in favor of plaintiffs for the amount of damages awarded by the verdict.

It would unduly prolong this opinion to consider separately the instructions to which exceptions are taken by respondents. Suffice it to say, we have read the instructions given, and conclude that, taken as a whole, they form a full, fair, and correct presentation of the law applicable to the issues framed in this action and the evidence introduced at the trial. No errors of law are shown to have occurred during the conduct of the trial, which would justify setting aside the verdict and judgment predicated thereon.

Respondents' claim that the appeal herein should be dismissed for failure to comply with section 953a et seq. of the Code of Civil Procedure, as amended and section 3, rule VIII, of the Rules of the Supreme Court and District Court of Appeal, is without merit, because there has been a sufficient compliance with the Code sections and rules aforesaid to entitle appellants to a determination of their appeal upon its merits.

Other points raised do not require discussion.

For the foregoing reasons, the order appealed from by which a new trial was granted is reversed as to respondents C. L. McComber and Linnie H. McComber; and, as to defendants T. C. Holz and C. J. Jasper, the order is affirmed.

WHITE, Justice.

We concur: YORK, P. J.; DORAN, J.